08-005481 Department Of Business And Professional Regulation, Construction Industry Licensing Board vs. Thomas Gepfrich, D/B/A Arizen Homes, Inc. Status: Closed Recommended Order on Monday, April 13, 2009.

Summary: Respondent violated provisions of the Florida Statutes justifying suspension of license and monetary penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

CONSTRUCTION INDUSTRY LICENSING )

BOARD, )

)

Petitioner, )

)

vs. ) Case No. 08-5481

)

THOMAS GEPFRICH, d/b/a ARIZEN HOMES, INC., )

)

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this

case on February 6, 2009, in Ft. Myers, Florida, before

Administrative Law Judge R. Bruce McKibben of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Lisa Livezey Comingore, Esquire

Tiffany A. Harrington, Esquire

Sorin Ardelean, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street, Suite 42

Tallahassee, Florida 32399-2202

For Respondent: Val L. Osinski, Esquire

Law Offices of Val L. Osinski

9600 West Sample Road, Suite 304

Coral Springs, Florida 33065

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent failed to

include his professional license number on contractual

documents, committed mismanagement or misconduct in the

performance of contracting services, abandoned construction

projects, and was incompetent or mismanaged work he performed.

PRELIMINARY STATEMENT

In August 2008, Petitioner, Department of Business and

Professional Regulation, Construction Industry Licensing Board,

issued an Administrative Complaint against Respondent, Thomas

Gepfrich, d/b/a Arizen Homes, Inc., containing 16 counts. (At

the final hearing, Counts nine through 12 were withdrawn;

jurisdiction on those counts was relinquished to Petitioner.)

Respondent filed an answer to the Administrative Complaint

denying the substantive allegations in the complaint and

requesting a formal administrative hearing.

Respondent's request for administrative hearing was

forwarded to the Division of Administrative Hearings ("DOAH") on

October 31, 2008. At the final hearing, Petitioner called three

witnesses: Steve Shanahan, Dornant Hall, and Arthur Gordon.

Petitioner's Exhibits 1 through 5, 7 through 9, 11 through 13

and 15 and 16 were admitted into evidence. Respondent testified

on his own behalf and offered no exhibits into evidence.

The parties advised the undersigned that a transcript of

the final hearing would be ordered. They were given 20 days

from the date the transcript was filed at DOAH to submit

proposed recommended orders. The Transcript was filed at DOAH

on March 6, 2009. Thereafter, an agreed Motion for Enlargement

of Time to file proposed recommended orders was filed. The

motion was granted. Petitioner timely submitted a Proposed

Recommended Order, and it was given due consideration in the

preparation of this Recommended Order. As of the date of this

Recommended Order, Respondent has not filed a proposed

recommended order with DOAH.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for, inter

alia , licensing general construction contractors in the State of

Florida. Its headquarters is located in Tallahassee, Florida.

2. Respondent is a certified general contractor, who has

qualified two businesses under his license: Arizen Homes, Inc.,

and Islander Builders, Inc. Respondent's two licenses, both of

which are currently active, are Nos. CG-C1104399 and

CG-C1204399. Respondent has two addresses of record with

Petitioner: 1862 Pier Point Street, North Port, Florida, and

2700 West Cypress Creek Road, No. B-111, Ft. Lauderdale,

Florida.

Shanahan Project

3. On or about December 21, 2005, Respondent contracted

with Steve Shanahan to build a home at 3416 6th Street

Southwest, Lehigh Acres, Florida. (An amended contract was

prepared on January 23, 2006, and an addendum was added on

February 8, 2007.) The contract price was $292,300. The

contract did not contain Respondent's license number on it.

Shanahan paid Respondent a deposit on the contract amount by way

of four checks totaling $14,865.

4. Shanahan did not own the lot on which the house was to

be built by Respondent. One of the checks (in the amount of

$250) Shanahan sent to Respondent was for "lot evaluation."

That is, Shanahan paid Respondent to determine the adequacy of

the lot for the proposed house, which Respondent presumably did.

Shanahan was relying on Respondent to assist him (Shanahan) with

the purchase of the lot.

5. Early in 2006, Shanahan began calling Respondent to

ascertain why no work was being done on the site. He was

advised by "Michael" at Respondent's office that the project was

going to take a little longer than expected. An addendum to the

contract was prepared in February 2008, extending the deadline

for completion from two years to three years. Shanahan signed

the Addendum.

6. No work has been done on Shanahan's house. The

contract with Respondent was never terminated. None of

Shanahan's deposit money was returned to him. Respondent is not

financially able to do any work on Shanahan's home at this time.

Hall Project

7. By contract dated October 22, 2006, Respondent agreed

to construct a house for Dornant Hall at 1017 State Avenue,

Lehigh Acres, Florida. The contract amount was $372,960. The

contract did not include Respondent's license number. Hall paid

Respondent a deposit of $17,648 by way of two separate checks.

8. The contract between Hall and Respondent was never

terminated. No work has been done on the proposed house, nor is

Respondent financially able to work on the project at this time.

Hall did not receive any of his deposit back from Respondent.

Gordon/Suarez Project

9. On June 10, 2006, Respondent contracted with Arthur

Gordon and Alma Suarez to construct a house for them at 1311

Southwest 38th Terrace, Cape Coral, Florida. The contract

amount was $404,039 for the lot, the house, and a pool. The

contract between Gordon/Suarez and Respondent did not include

Respondent's license number.

10. Gordon/Suarez paid for the lot on which the home was

to be built. An additional deposit of $44,411 was paid to

Respondent either by way of checks or draws from the

construction loan. Some of that amount may have been for impact

fees or permits relating to construction, but the permits were

never picked up from the city or county by Respondent.

11. The contract between Respondent and Gordon/Suarez was

never terminated. The house called for in the contract was

never built. Gordon/Suarez did not receive their deposits back.

12. Gordon/Suarez ultimately contracted with another

builder to construct a home on the site. The house built for

Gordon/Suarez had more options than the one planned by

Respondent and cost less. However, Gordon/Suarez never got

their money back from Respondent.

Respondent's Position

13. Respondent has been a builder since 1972 and a

licensed general contractor in Florida since at least 1990 (the

date Island Builders, Inc., was licensed). Respondent was

building homes in Lee and Charlotte counties for many years. In

total, Respondent built approximately 200 to 300 homes in that

geographic area and had plans to expand to other counties as

well.

14. For most of its existence, Respondent relied upon a

line of credit from lenders to fund construction projects. Once

a contract with a client was finalized, Respondent would take a

small deposit, then begin construction using money from the line

of credit. The line of credit was sometimes also used to

purchase lots on which to build the homes.

15. From September 2006 through July 2007, Respondent

began to experience great difficulty closing construction

projects. The real estate boom had reached its climax and was

beginning to quickly diminish. Appraisals of projects were

going down. Respondent could not match competitors which owned

their own lots. It was a difficult time for Respondent

financially.

16. In 2007, Respondent had approximately 100 houses in

various stages of development. About one-half of those homes

had received Certificates of Occupancy so that the buyers could

move in once the closing was held. However, many buyers did not

close on the deals for a number of reasons. Some could not get

an appraisal of the home high enough to justify the mortgages

for which they had applied. Others simply got "cold feet" as a

result of the economic situation in the state. Many buyers

simply did not show up at the scheduled closing.

17. Buyers began to ask Respondent for discounts at

closing, meaning that Respondent was losing money on many

projects. In response, Respondent began negotiating with its

lenders, seeking for a discount from them to match the discounts

being requested by buyers. Respondent asked its bank for a

30-percent discount; the request was denied. Respondent asked

for 16-percent; that was also denied.

18. Finally, in May 2008, negotiations between Respondent

and its lenders ended. The banks refused to give Respondent any

leeway on the amounts owed on the construction loan lines of

credit. The banks refused to enter into an agreement to

purchase the houses with Certificates of Occupancy in order to

generate capital to pay off the line of credit.

19. The effect of termination of discussions between

Respondent and the banks was to place Respondent in bankruptcy.

That effectively ended Respondent's ability to do any further

work on its clients' houses. And because all of Respondent's

funds were tied up in bankruptcy, Respondent could not offer any

refunds to his aggrieved clients. Respondent also offered to

finish all the pending projects for the banks, allowing the

banks to then negotiate settlements with the buyers, but that

offer was refused as well.

20. Respondent did not refund the deposits paid by

Shanahan, Hall, and Gordon/Suarez. Based on the pending

bankruptcy, Respondent does not have the current ability to make

such refunds.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding pursuant to Section 120.569 and Subsection 120.57(1),

Florida Statutes (2008). All references herein to the Florida

Statutes shall be to the 2008 codification.

22. Petitioner is the state agency charged with regulating

the practice of contracting pursuant to Section 20.165 and

Chapters 455 and 489, Florida Statutes.

23. Pursuant to Section 489.129, Florida Statutes, the

Construction Industry Licensing Board is empowered to revoke,

suspend or otherwise discipline the license of a contractor who

is found guilty of any of the grounds enumerated in subsection

(1) therein. Subsection 489.129(1), Florida Statutes, states in

relevant part as follows:

The board may take any of the following

actions against any certificateholder or

registrant: place on probation or reprimand

the licensee, revoke, suspend, or deny the

issuance or renewal of the certificate,

registration, or certificate of authority,

require financial restitution to a consumer

for financial harm directly related to a

violation of a provision of this part,

impose an administrative fine not to exceed

$10,000 per violation, require continuing

education, or assess costs associated with

investigation and prosecution, if the

contractor, financially responsible officer,

or business organization for which the

contractor is a primary qualifying agent, a

financially responsible officer, or a

secondary qualifying agent responsible under

s. 489.1195 is found guilty of any of the

following acts:

* * *

(g) Committing mismanagement or

misconduct in the practice of contracting

that causes financial harm to a customer.

Financial mismanagement or misconduct occurs

when:

* * *

2. The contractor has abandoned a

customer's job and the percentage of

completion is less than the percentage of

the total contract price paid to the

contractor as of the time of abandonment,

unless the contractor is entitled to retain

such funds under the terms of the contract

or refunds the excess funds within 30 days

after the date the job is abandoned; or

* * *

(i) Failing in any material respect to

comply with the provisions of this part or

violating a rule or lawful order of the

board.

(j) Abandoning a construction project in

which the contractor is engaged or under

contract as a contractor. A project may be

presumed abandoned after 90 days if the

contractor terminates the project without

just cause or without proper notification to

the owner, including the reason for

termination, or fails to perform work

without just cause for 90 consecutive days.

* * *

(m) Committing incompetency or misconduct

in the practice of contracting.

* * *

For the purposes of this subsection,

construction is considered to be commenced

when the contract is executed and the

contractor has accepted funds from the

customer or lender. A contractor does not

commit a violation of this subsection when

the contractor relies on a building code

interpretation rendered by a building

official or person authorized by s. 553.80

to enforce the building code, absent a

finding of fraud or deceit in the practice

of contracting, or gross negligence,

repeated negligence, or negligence resulting

in a significant danger to life or property

on the part of the building official, in a

proceeding under chapter 120.

24. Inasmuch as the action being taken in this case

against Respondent is penal in nature, Petitioner must prove its

case by clear and convincing evidence. Department of Banking

and Finance v. Osborne Stern and Co. , 670 So. 2d 932 (Fla.

1996); Ferris v. Turlington , 510 So. 2d 292, 295 (Fla. 1987).

25. The clear and convincing evidence standard requires:

[T]hat the evidence be found to be credible,

the facts to which the witnesses testify

must be distinctly remembered; the testimony

must be precise and explicit and the

witnesses must be lacking in confusion as to

the facts at issue. The evidence must be of

such a weight that it produces in the mind

of the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations to be established.

Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

26. The uncontroverted testimony of Shanahan, Hall, and

Gordon/Suarez is clear and convincing evidence that Respondent

failed to do work on their respective homes for periods in

excess of 90 days. Respondent's mitigating fact, that the bank

line of credit was withdrawn, is plausible, but does not excuse

Respondent from his responsibility.

27. Respondent admits that his license number does not

appear on the contracts in question. There is no finding of

intent on Respondent's part to misrepresent or mislead anyone,

but the contracts certainly point out this shortcoming. Its

importance to this case, on balance, is minimal.

28. The evidence as to the amounts owed by Respondent to

Shanahan ($14,615), Hall ($17,648), and Gordon/Suarez ($44,411)

is also clear and convincing. Again, the fact that Respondent

is in bankruptcy and does not have resources to repay these

amounts does not excuse Respondent from its responsibility.

29. The Department expended $841.09 in costs associated

with the investigation of claims against Respondent. The

Department is authorized to tax that cost against Respondent.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by the Department

of Business and Professional Regulation, Construction Industry

Licensing Board, finding Respondent guilty of violating

Subsection 489.129(1), Florida Statutes, and that: (1) a fine

of $9,750 be imposed and that Respondent be required to pay

$841.09 in costs; and (2) Respondent's license be suspended

until such time as all fines and costs have been paid. All

claims for restitution by the aggrieved parties will need to be

filed in the bankruptcy court proceeding.

DONE AND ENTERED this 13th day of April, 2009, in

Tallahassee, Leon County, Florida.

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 13th day of April, 2009.

COPIES FURNISHED :

G. W. Harrell, Executive Director

Construction Industry Licensing Board

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Ned Luczynski, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Val L. Osinski, Esquire

Law Offices of Val L. Osinski

9600 West Sample Road, Suite 304

Coral Springs, Florida 33065

Lisa Livezey Comingore, Esquire

Tiffany A. Harrington, Esquire

Sorin Ardelean, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street, Suite 42

Tallahassee, Florida 32399-2202

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.